Power Finance Corporation (PFC) and REC Limited under the aegis of Ministry of Power have approved a merger scheme that will combine the two state-owned NBFCs into a single power sector financing entity with a loan book exceeding ₹11 lakh crore. The merger remains subject to approvals from shareholders, creditors, regulators, and the Government of India.
Key Highlights
- PFC and REC boards approve merger scheme.
- Merged entity to have a loan book of over ₹11 lakh crore.
- Share exchange ratio fixed at 88 PFC shares for every 100 REC shares.
- Merger awaits shareholder, regulatory and government approvals.
The Board of Directors of Power Finance Corporation Limited (PFC) and REC Limited (REC) have approved a Scheme of Merger under the provisions of the Companies Act, 2013, paving the way for the creation of one of India’s largest public sector financing institutions dedicated to the power and infrastructure sectors.
Under the proposed scheme, REC will merge into PFC, resulting in a combined financing entity with an aggregate loan book exceeding ₹11 lakh crore. The merger is aimed at strengthening financial capabilities, improving operational efficiency, and enhancing the ability to support India’s rapidly growing power and infrastructure requirements.
The merger will become effective only after receiving all statutory approvals, including approvals from the shareholders and creditors of both companies, relevant regulatory authorities, and the Government of India. An important condition of the scheme is that the merged company must continue to qualify as a Government Company under the Companies Act, 2013, with the Government of India retaining majority ownership, voting rights, and control.
Based on the joint valuation report, the approved share exchange ratio provides that REC shareholders will receive 88 equity shares of PFC (face value ₹10 each) for every 100 fully paid-up equity shares of REC (face value ₹10 each). The record date for determining eligible shareholders will be announced by the boards of both companies at a later stage.
Several leading professional firms have been appointed to oversee the transaction. Deloitte Touche Tohmatsu India LLP is serving as the Transaction and Tax Advisor, while Cyril Amarchand Mangaldas is acting as the Legal Advisor to both companies.
For valuation, RBSA Valuation Advisors LLP has been appointed by PFC and Ernst & Young Merchant Banking Services LLP by REC to prepare the joint valuation reports. The fairness opinions on the valuation have been provided by SBI Capital Markets on behalf of PFC and Nuvama Wealth Management on behalf of REC.
Once completed, the merger is expected to create a stronger public sector financial institution capable of supporting India’s energy transition, power infrastructure expansion, renewable energy financing, and large-scale infrastructure investments.
Conclusion
The proposed merger of PFC and REC marks a significant step in consolidating India’s public sector power financing ecosystem. Subject to regulatory and shareholder approvals, the combined entity is expected to emerge as a financially stronger institution capable of supporting the country’s expanding energy and infrastructure ambitions.
FAQs
Q1. What has been approved by PFC and REC ?
The boards of both companies have approved a scheme to merge REC into PFC.
Q2. What will be the size of the merged company?
The combined entity will have an aggregate loan book of more than ₹11 lakh crore.
Q3. What is the approved share exchange ratio?
REC shareholders will receive 88 PFC shares for every 100 REC shares held.
Q4. Is the merger effective immediately ?
No. The merger is subject to approvals from shareholders, creditors, regulators, and the Government of India.
Q5. Will the Government of India retain control ?
Yes. The scheme requires the Government of India to continue holding majority ownership and voting rights in the merged entity.
